Will the Philippines need its mighty FIST?
In May, Benjamin Diokno, governor of Bangko Sentral ng Pilipinas (BSP), proudly announced the formation of a new ‘bad bank’ asset management company regime under the Financial Institutions Strategic Transfer Act - known by the bold and bracing acronym, FIST.
Diokno had his reasons for being proud of the endeavour. In years past, the Philippine banking sector has suffered for its lack of resilience. In the aftermath of the Asian financial crisis, the NPL ratio in the Philippines averaged 20.2% from 1999 to 2002, according to the Asian Development Bank. But the Philippines has changed in many ways: it built a bad bank institution back then too, but it took about five years to do it. This time, enough has been learned from past experience that the infrastructure has been built with the crisis still raging.
What’s interesting, however, is that the banking sector is looking so robust that one wonders whether FIST is going to be needed and this tells us something interesting about the evolution of risk management in emerging Asia.
“Although the asset quality of banks in Asia has been under pressure due to the pandemic, most banks did not experience a sharp increase in non-performing loans because of loan forbearance and support measures that eased borrowers’ repayment burden,” says Joyce Ong, financial institutions analyst at Moody’s.